Harley-Davidson will shift production of new models out of US in a desperate attempt to avoid fall out from trade war.
In a filing to their investors, Harley-Davidson have announced that they plan to shift production of some of the models out of the US to avoid the new EU import tariffs. The new 31% import tariffs came into effect on June 22 and were imposed by the EU as a response to the steel and aluminium tariffs brought by the American government. Harley-Davidson say the tariffs will result in approximately $2200 (£1650) being added to the export cost of each motorcycle.
“Harley-Davidson believes the tremendous cost increase, if passed onto its dealers and retail customers, would have an immediate and lasting detrimental impact to its business,” the company said.
To prevent this damage in the short term, Harley have said they will not raise their prices, instead they will bear the financial impact of the tariffs, estimating them to cost between $30 – 45 million (£22 – 33 million) for the remainder of 2018.
If it continues, Harley estimate the tariffs will cost them $90 – 100 million (£67 – 75 million) a year, which is approximately one third of their entire operating profit. Seemingly, this has left Harley-Davidson little option but to shift production elsewhere.
“To address the substantial cost of this tariff burden long-term, Harley-Davidson will be implementing a plan to shift production of motorcycles for EU destinations from the U.S. to its international facilities to avoid the tariff burden. Harley-Davidson expects ramping-up production in international plants will require incremental investment and could take at least nine to 18 months to be fully complete.”
Although they gave no word as to where production may go, it is assumed production will shift to India, where Harley currently build their Harley-Davidson Street 750 and Harley-Davidson Street Rod.
Europe is a critical market for Harley-Davidson, where they sold 40,000 bikes last year making it the second largest market only to the US. This news comes at a particularly bad time for the business, as falling sales in the US already forced them to close their Kansas manufacturing plant earlier this year.
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